Spilling the Beans(A)
Any regular reader of Investing for a Better World knows that we take corporate reporting on social responsibility issues seriously here at Trillium Asset Management. Indeed, promoting transparency and disclosure is one of the central themes underlying most of our advocacy with companies, and we spend a lot of time just asking for companies to issue corporate social responsibility (CSR) reports.
Why, you may ask. Aren’t most of those reports just greenwashing to make companies look good? Do they make a difference? We think they do, particularly given the development of recognized standards for social responsibility reporting through the Global Reporting Initiative (GRI). Strong reports provide information that’s increasingly useful to us and to others in making investment decisions. Just as importantly, we constantly hear from companies that the process of pulling together such reports helps them better manage the complex social and environmental issues they face and often helps their business in unexpected ways. In fact, at a recent conference, the head of CSR reporting for a major automaker told the audience he thought it would be worth it to do their report even if copies never left their buildings or were read by anyone outside the company.
This spring Starbucks Coffee Company issued its fourth annual corporate social responsibility report, which we think represents real leadership in CSR reporting. It includes specific quantitative targets on important issues like how much Fair Trade Certified™ coffee Starbucks buys and plans to buy in the future, indicates where Starbucks is meeting its social responsibility goals and where it’s falling short, and even includes questions from some of its toughest critics, like the group Global Exchange. It’s not a coincidence that we like the report, since after its CSR report came out last year, Starbucks asked for feedback and suggestions for improvements from us and about 25 other stakeholder groups, including Fair Trade activists, environmental groups, community organizations, and student groups.
To get a company perspective on how and why Starbucks prepares a CSR report and what they get out of it, I visited Starbucks headquarters to talk with Amy Anderson, Communications Program Manager, who leads the preparation of Starbucks annual CSR reports. Here are some of the highlights of our conversation:
How do you choose what goes in the report?
We start by looking at what are the most relevant and material social, environmental and economic impacts of our business – so we look at our supply chain from the coffee farmer all the way through to the coffee drinker, asking what are our social and environmental impacts along that whole chain. We also use the GRI as a guide and surveys from socially responsible investors. They help us understand what content and metrics are important to the SRI community and that’s helped our reporting process.
We also really take into account stakeholder feedback. Last year was the first time we asked stakeholders what they think of our report, how credible is it, what information is most important, and how can we improve our report. From my perspective, that really propelled us to the next level of transparency and credibility with this year’s report because you learn a lot by listening. If we’re not listening to stakeholders and are not reporting what they want us to report, then what’s the point of reporting? At the end of the day, that’s why we’re reporting, to build trust with our stakeholders. It’s always helpful to let executives know that external stakeholders want this information. [As we decided what to put in the report] every time we told them stakeholders are asking for this they said, “Okay, if they want to know it, why not?” If we don’t tell people what we’re doing, they might assume we’re not doing the right thing or we’re not doing anything.
How do you ensure the report’s accurate and what does it mean that it’s independently verified?
First, we work closely with our partners in financial reporting and have a rigorous internal approval process and internal auditing process to double-check everything in the report. This year’s report is 72 pages, but we have 5 notebooks of back-up documentation that could fill a bookshelf. As part of their independent review process, our verifier Moss Adams tests certain data and assertions in the report, interviews executives and management, and talks to external parties who are in the report to verify what we’re saying about them or the data we’re reporting on their behalf is accurate. Having this independent verification adds an extra level of assurance and credibility, which most external stakeholders said they wanted. It also brings even more rigor and credibility internally. When you meet with people who are providing data and you say, “This information will be independently verified and you have to have back-up documentation and all your ducks in a row,” it lets them know how important social responsibility and the CSR report is to the company.
How does the report affect Starbucks business decisions? Has Starbucks past reporting affected how it does business now?
Broadly, it’s really heightened awareness for CSR across the company and has elevated our CSR strategy, so that people can see how their actions and their decisions are a part of CSR as opposed to CSR being a separate department. It enables us to have ongoing and regular conversations about our CSR strategy and check-in meetings with people to see how they are doing against the targets we’ve put in the report. The report is the final product, but the exciting part is the process we go through and the conversations we get to have, not only with the people at the very top of the company but also the managers who are making sure this all happens.
Last year’s report was the first time we set public CSR targets, which was putting a stake in the ground, saying “This is our roadmap, this is what we’re committed to doing.” That has been really helpful because people want to meet those public targets. A concrete example is that in least year’s report, we put out five-year projections for our purchases of beans covered by Coffee and Farmer Equity (C.A.F.E.) practices [a set of social, environmental, and economic accountability guidelines focused on the sustainability of high-quality coffee production]. I hear on a monthly basis how this is helping to guide our purchasing. We set aggressive goals, but people want to go beyond them, and this year we reported that we exceeded our 2004 goal of 30 million pounds and bought 43.5 million pounds of coffee under C.A.F.E. practices.
The report includes questions on controversial topics from critics and some indicators of where the company hasn’t met goals it set for itself. Was it hard to get the company to share this information and why does it do this?
We addressed many of the sticky questions we get – questions about unions, Fair Trade, individual stores not recycling – but we did not have a lot of pushback internally about including them. These are questions we get asked often, and including them in the report helps our internal partners understand how to be able to talk about this and feel proud about what we do. And many of our critics told us “Thanks so much for including my question in your report.” We knew it was a risk, but this builds relationships instead of shying away from engaging.
What’s next for Starbucks reporting and what do you think the report will be like in five years?
From my perspective, we’re committed to reporting on an annual basis. That regular cycle and consistency just like financial reporting shows a sense of commitment to our external stakeholders and internally too. Some companies now do CSR reports every other year, but I don’t want to have an off year. In five years, our goal is that our report will be more global and our international markets will have regional supplements that localize what they’re doing. And as the [U.K.-based consulting group] SustainAbility says, “When reporting ends, communicating begins.” So it’s a challenge to figure out how do we not just produce a report but actually communicate the information that’s in there. That’s where companies are now evolving, and learning best practices from each other.